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U.S. Deficits' Non-impact on Europe |
| Section: CURRENT ISSUES / ECONOMIC WATCH |
| Author: Martin Hutchinson |
| Publication: The world & I online |
| Issue Date: 1/1/2005 |
| Size: 1,255 Words, 7,889 Characters |
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My colleague Martin Walker wrote recently of the possibility that U.S. economic profligacy could have its principal adverse effect on the European Union economy, through the deflationary effect of an overvalued euro. Fun though this might be for President George W. Bush to contemplate, and amusing though it is to think of French President Jacques Chirac contemplating it, I consider the prospect unlikely.
This "Texas revenge" thesis is an attractive idea, at least for those "red state" types who regard continental Europe with the deepest suspicion and Chirac as a treacherous foreigner who needs to be taught a lesson after his un-supportiveness on Iraq.
The mechanism whereby the United States' excessive budget deficit and trade deficit might cause a deep recession in the anti-U.S. part...
. . .
...ensitive investors bought more Treasuries and fewer euro-denominated bonds and bills. In other words, the market would work, the United States would suffer the recession it deserves and the EU would be largely unaffected.
Unless Asian central banks remain completely irrational, both economically and as investors, Chirac is likely to have the last laugh.
© 2004 United Press International
(812 of 7,889 characters)
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